2009 (6) TMI 773 - AT - Central Excise

Valuation - clutch - includibility - welded with driving lugs - Job work - Held that - It is not a case where the lugs were supplied free of cost by GSCL so as to be attached and welded to the clutch cover, in which case, their value was required to be added in the value of the final product. Welding of the lugs to the clutch cover was on job work basis in terms of Rule 4(5)(a) and under the cover of challans. GSCL had availed the credit on the lugs provided by them and the value of the same would be added in the final assembly manufactured by GSCL. As such, the duty on the lugs price would be discharged by GSCL. We find no reasons to add the value of such lugs in the value of the clutch covers manufactured by the appellant, especially when such job has been done by the appellant in terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2002. Time limitation - Held that - The movements of the driving lugs were under the cover of challan and in terms of Rule 4. As such, it can not be said that the appellants had any mala fide or any suppression/mis-statement with intent to evade payment of duty - All periodical returns were being filed by them, the driving lugs were being brought to the factory under the cover of challan and final product was also being covered under the cover of same challan - the demand is barred by limitation also. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute over the value of clutch covers welded with driving lugs.
2. Demand of duty raised against the appellant for the period March 2002 to June 2002.
3. Whether the cost of driving lugs should be added to the cost of clutch covers.
4. Application of Rule 4(5)(a) of Cenvat Credit Rules, 2002.
5. Bar on demand by limitation.

Issue 1: Dispute over the value of clutch covers welded with driving lugs:
The appellant, engaged in manufacturing auto parts, was contracted by GSCL for clutch covers with welding job work. The authorities contended that the cost of driving lugs should be added to the clutch covers' cost. A demand of duty was raised against the appellant for this reason.

Issue 2: Demand of duty for the period March 2002 to June 2002:
A show cause notice was issued to the appellant in 2004 for the demand of duty amounting to Rs. 1,60,284 for the period March 2002 to June 2002. The demand was confirmed by lower authorities along with penalties and interest.

Issue 3: Cost of driving lugs added to the cost of clutch covers:
The appellant primarily manufactured clutch covers and did the welding job work for GSCL. The welding of lugs to the clutch covers was done under the cover of challans as per Rule 4(5)(a) of Cenvat Credit Rules, 2002. The value of lugs should not be added to the clutch covers' cost as the job work was done under specific rules, and the duty on lugs' price would be discharged by GSCL.

Issue 4: Application of Rule 4(5)(a) of Cenvat Credit Rules, 2002:
The welding of lugs to the clutch cover was done on a job work basis under Rule 4(5)(a) and covered by challans. The value of lugs provided by GSCL should not be added to the final assembly manufactured by the appellant.

Issue 5: Bar on demand by limitation:
The demand was found to be barred by limitation as the movements of driving lugs were covered by challans, and there was no evidence of mala fide intentions or suppression by the appellant. All returns were filed, and the movements were documented properly, leading to the conclusion that there was no suppression to warrant invoking a longer period of limitation.

In conclusion, the appellate tribunal allowed the appeal both on merit and limitation, holding that the value of driving lugs should not be added to the cost of clutch covers, and the demand was barred by limitation due to proper documentation and compliance with rules.